Standard Life has restructured one of its global liquidity funds – a sterling seven-day notice money market fund – to remove the guarantee it had given to investors.

At the same time it is making a capital injection into the fund, a move that would cost the life assurer about £50m.

The change was due to the deterioration in liquidity conditions, Standard Life said, as it reported an 8 per cent increase in first-quarter life and pensions sales.

The restructuring of the £1.8bn fund, which involves it moving to a mark-to-market pricing structure, will trigger a £52m pre-tax loss, or £37m post-tax, in the group’s first-half figures, it said.

However, the cash cost would be only £17m.

The fund is mainly attractive to wealthy investors seeking a higher return on short-term cash balances.

Standard Life said it did not expect an outflow from the fund as a result of the move and it remained “open for business”.

Analysts at Cazenove said the move was “embarrassing” though “small potatoes compared with recent bank losses”.

David Nish, finance director, denied the move would cause further discomfort for Standard Life, already reeling from its failed £4.7bn offer for Resolution and the loss of UK retail head Trevor Matthews to rival Friends Provident.

“I would not use the word embarrassing,” said Mr Nish.

“In these very unique and exceptional circumstances, as a strong sponsor, we took the view this is the right thing to do.”

He added that the restructuring had capped the potential liability to shareholders, while investors had been protected as Standard Life had replaced the two tranches of asset-backed securities with corporate bonds offering superior credit ratings and higher yields.

The ABS holdings, which total £1.02bn, will now be on Standard Life’s balance sheet, and it intends to hold them to maturity when it expects them to be redeemed at par.

Mr Nish also said that Standard Life Bank, which cut mortgage lending by 46 per cent in the first quarter, would not meet its target of a 15 per cent post-tax return on equity this year.

UK life and pension sales rose 6 per cent to £3.52bn, but sales of self-invested personal pension plans fell 14 per cent to £1.06bn.